| Subject Code : | TACC507NA | Country : | Australia |
|---|
Assignment Task -
Case 1 Cost-Volume-Profit (CVP) analysis + marginal analysis
You are the manager of a Bright company that produces paper bags for food shops and supermarkets.
You are provided with the following information:
Bright company is able to produce 100,000 packs of bags.
Its current sale volume is 80,000 packs of bags per year.
This has achieved its maximum sales force.
The current selling price is $20 per pack of bags.
Variable costs in total are $400,000;
Fixed costs are $ 160,000.
A newly established shop has approached you, informing a willingness of purchasing 15,000 packs of bags per year at a price of $10 for each bag. If this proposal is accepted, unit variable costs would remain the same however fixed costs would increase by $60,000 per year.
Required:
1-Discuss whether this proposal is worthwhile from a financial point of view.
2 -Analyze, if your competitor in the paper industry knows the above cost and price information, what action(s) may the competitor take to beat you in the market.
Case 2 Activity-based Costing (ABC) vs. Time-based Costing
Hello, the company manufactures three products, A, B, and C. Forecast data concerning overheads (indirect costs) of the products for the next period as follows.
|
A |
B |
C |
|
|
Forecast output (units) |
50 |
60 |
80 |
|
Machine hours per unit |
4 |
3 |
2 |
|
Number of customer orders |
8 |
10 |
12 |
|
Number of quality control inspections |
15 |
20 |
25 |
|
Number of engineering consultancies |
8 |
7 |
5 |
|
Areas of workshops (m2) |
3,000 |
4,500 |
2,500 |
Cost pools and related cost drivers
Cost pool $ Cost driver
Machine operating 27,000 Machine hours
Order processing 6,000 No. of customer orders
Quality control 3,000 No. of quality control inspections
Engineering consultancy 2,000 No. of engineer consultancies
Rent of the campus 10,000 Areas of workshops
Required
Calculate the overhead cost to be absorbed by each of the products using the following absorption costing methods.
1 -A traditional absorption method based on a machine hour rate.
(2) An activity-based method, using the relevant cost drivers to trace overhead costs to the individual products.
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